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What is Commingling Funds

Commingling of  funds means to mix your customers' funds with your own business funds. Actually, you receive your customer funds for many purpose, it is not loan to you. So, you can not buy or use this fund for buying any asset or using for your business operation. But under commingling of funds, you mix this fund for paying your loan or using other purposes. As per accounting rules, it is cheating. As per law, this is breach of trust of your customer. It is also called co-mingling.

But if you are not doing business, you can mix your friend's fund or other funds with your own fund, it will also be commingling of funds. But today, we will explain it from business point of view.

Exception 

For example, I have created some fund for employees' accident  welfare. Recently, my employee's father-in-law was in emergency. We took him hospital. I took the loan from my employees's accident welfare fund. I spent Rs. 10,000. After sometime, I got refund of this money from my employee. Now, it is also commingling of fund but it is not cheating. Yes, I have taken the money. But my aim is still to help my employee.

Wikipedia Examples 

Wikipedia has given very good examples of commingling of funds. First example which I read is of the advance money of tenant. Suppose, a person takes the shop on rent. Businessman takes some advance money as security. When tenant will go, this money will be refunded. If businessman uses this fund for repaying his other business loan. It will be commingling of funds. Tenant can claim in court for his funds.

Investment funds

Wikipedia has explained second example of a customer who gives money to broker to invest in shares. But he do not invest the money as per his requirement. He uses for his own business expenses. This will also be the commingling of funds.

As per company law, " Company can not use the fund through commingling. Customer can ask in court for telling the detail through opening corporate veil."

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Accounting Education: What is Commingling Funds
What is Commingling Funds
Accounting Education
https://www.svtuition.org/2012/02/what-is-commingling-funds.html
https://www.svtuition.org/
https://www.svtuition.org/
https://www.svtuition.org/2012/02/what-is-commingling-funds.html
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